Playback and Payback series; (part 16) panic in the Suites – Napster, Grokster, the Last Kazaa (II)

Even so, sound recordings would become far less expensive, because the physical packaging, warehousing, and real estate expenses would not exist. People would happily spend money on digital copies of record companies’ catalogs once again. But that didn’t happen. Unfortunately for the record business, several things prevented this.

For one thing, the open-source nature of the MP3 format put the computer literate way ahead of the curve. By the time the biz became aware that college computers overflowed with digital music files, the means of compressing music had become institutionalised. Record companies also failed to recognise the internet as a means of, once more, selling through their catalogs. Perhaps this was because they hadn’t yet milked the CD for all they could. Remember, the glass-and-lacquer disc had served them for over 40 years.

The vinyl disc reigned for 35. They had just finished the brief decade of the cassette when the CD fell into their laps. The CD barely had 15 years in the recorded-medium throne when the challenge of the digital domain, of software that never actually needed a permanent container like a CD or a tape, challenged both the assumptions and the dominance of the record business.

The threat also came from outside the business (even the cassette had come from within – the invention of Philips), and it blindsided them. Worse, they had no control over it, or even any idea how to control it. Coming to grips with the change would take them a decade and a half, and by the time they did, the genie had long escaped its bottle and the music business landscape was forever altered.

The record business’s first impulse was to try to use its lobbying muscle to control the digital domain. By 1993 cable TV and satellite systems were cablecasting digital music. Fearing that consumers’ ability to tape this digital music would allow them to make near-digital-quality copies, the record companies began to lobby Congress for new laws and amendments to the copyright code. So it’s not like they totally did not see the possibility. Most people in the industry just ignored its ramifications. Some people didn’t. Todd Rundgren was one of the first artists to put up his own website with the option to pay a membership fee and hear everything he did as soon as it was done. He began to see that actual record stores would become a thing of the past:

It will be Tower Records and Blockbuster Video, except they won’t have storefronts. They’ll have big, faceless buildings with giant mainframe computers in them, waiting for you to call up. Then they’ll download it to your house and they’ll charge you for it, just as if you walked into the record store to buy it. The difference is that prerecorded media will disappear.

And actually, the CEO of Sony agreed, to an extent. “Retailers have to be proactive,” said Michael Schulhof in 1995. “There are opportunities in the future that are not threats to retailers’ business. Retailers have to do more to ensure their place in the future electronic marketplace.”

By 1997, users of the internet began to probe the music business – and copyright law in general – in some rather tender areas, and the record business began to slowly take notice. On college campuses around America and the world, students were posting copies of songs, along with “cracked” commercial software and images of naked women (most of the users were male computer students). Anyone with web access could find the song files, find a player for the files, and voilà! Instant music collection.

Indeed, to the record business the World Wide Web had come to resemble the Spanish Main of the 18th century: it was a haven for pirates. The reaction of the record business was to load canons and engage in battle. “Until the appropriate balance between free-flowing information and intellectual property is struck,” said then-RIAA president Hilary Rosen, “the internet will never achieve its potential to become a viable medium for the sale of music. We must not let a pirate market on the internet get established before the legitimate one is ready.”

She would sound this theme over and over again for nearly a decade. However, the industry she was representing seemed less than interested in turning the internet into “a viable medium for the sale of music.” And by the time she’d said this, it was already too late. Some tentative steps were taken.

Oasis asked fan sites to please take down unauthorised music videos from their sites. Geffen Records sent polite letters to the deans, provosts, presidents, and heads of IT of the various colleges with some of the biggest and most visible bulletin boards, making them aware that by hosting these bulletin boards, they were in violation of the copyright laws of the United States. “The internet’s threat to the control of music has caused the handful of interlocked global monopolies which dominate the music industry to reveal their naked greed,” said Rock and Rap Confidential editor and social and music critic Dave Marsh.

“This new technology offers the potential to make all the music available to all the people all the time.” However, since this potential didn’t fit in with any of the record business’s current paradigms of distribution, it didn’t see the possibilities. For example, Oasis’s management, while it might have not wanted a downloadable version of the group’s current album on the fan sites, might have actually thought twice. After all, fans of the band tended to visit these sites, and wouldn’t fans be apt to buy a CD, especially after they heard it?

Beyond that, if the management didn’t want unauthorised music on the site, wouldn’t it have been in Oasis’s best interest to, perhaps, authorise some non-LP B-sides, live tracks, or rarities? This offers a win-win situation: the fans have music – indeed, music that no one else would get if they didn’t visit the fan sites. Oasis earns the goodwill of its fans and gets its music out to people who might not otherwise hear it.

Of course, as it turned out, this all became a moot point. Now, pretty much anyone with a computer can download nearly anything Oasis ever recorded, either legally by paying between 80c and a dollar, or in the legally gray to blatantly illegal area of P2P downloads. At the time, however, the record companies had big issues with digital music.

But the record companies’ anxiety stayed on a back burner at the time. More general sites for MP3 files had found their way onto the net, like MP3.com, and search engines like Lycos found the still-more common bulletin boards, but CD burners had not yet become widespread. As of 1996, the only way to get music files off the computer was to put them on a cassette: home-taping strikes again.

Over the course of the next year, the record business got a one-two punch worthy of Lennox Lewis. From the consumer’s viewpoint, chip technology once again provided the answer to immobile music files. Korean computer hardware manufacturer Saehan announced its newest innovation, the MPMan, in 1997. The product, in a limited way (it could only hold an hour of music), liberated the MP3 file from the computer and put it into the pockets of early adapters. Suddenly, the music business sounded the alarm.

At just around the same time that alarm sounded, a first-year student at Northeastern got into trading music files via Internet Relay Chat (IRC). He saw a way to extend IRC’s capabilities so not only could the files be passed, but people could also search one another’s computers for music and download it. He gave the program his IRC handle, and before long anyone with a music jones and a modem had downloaded Napster and was using it to access music files, person to person, peer to peer.

“It was rooted out of frustration not only with MP3.com, Lycos, and Scour.net, but also to create a music community,” former Northeastern student Sean Fanning said of his innovation. “There really was nothing like it at the time.”Peer to peer remains a strange and troubling business model. Not only was Napster (and all the programs that followed in its wake) making music an essentially free commodity, but the programs themselves were also free. While nearly all of the high-profile P2P software and internet music sites of the late 1990s managed to find investors, none had a really clear idea how to make money from their digital creations.

So, while the conversation continued around the record business, within the record business, the new notion of file sharing earned hushed whispers at best. “I think the [record] industry has basically ignored the warning signs that were on the wall,” said Warner Bros. Chief information officer Tsvi Gal. “We, as an industry, by and large ignored piracy in the hopes that it wouldn’t be widely accepted. Of course, it’s not going to go away so easily.”